Rising China shrugs off outside opinion

Apparently fearing that the tougher sanctions Washington is advocating would jeopardize its growing oil and gas investments in Iran, China is resisting such punishment. “This is not the right moment for sanctions,” China’s ambassador to the United Nations said Tuesday.

Red lines on the economy

Disputes over bilateral trade and economic issues seem just as hard to head off.

Washington slapped additional duties on Chinese steel products Tuesday for the second time in a week, saying they were being sold at unfairly low prices.

Such protectionist moves “harm the Chinese government’s efforts to create jobs for Chinese workers” says Professor Shen. “We feel America is not treating China equally.”

Beijing’s continued efforts to weather the international economic crisis by exporting its way out of trouble – subsidizing export companies and keeping the renminbi currency’s value low – grates in Washington.

Larry Summers, director of Obama’s National Economic Council, and other senior US administration officials have argued forcefully for an end to China’s huge trade surpluses, demanding that Beijing should do more to stimulate domestic consumption and rely less on US shoppers.

“There is a fundamental incompatibility between China’s short-term decisions on where it is going and the US administration’s vision of a global rebalancing,” says David Gordon, head of research at the Eurasia Group, a New York-based political risk consulting firm. “The Obama administration is not going to accept that.”

Beijing, however, is not going to give way. “China’s outlook on the US has changed perceptibly since the global financial crisis,” says Drew Thompson, head of the China program at the Nixon Center in Washington. “They see their quick recovery and lingering challenges in the US as a vindication of their political system and their policies.”

“Don’t even think about a revaluation of the renminbi,” says Shen. “If China does what the West asks we would lose more and more jobs and people would be on the streets. The government might face a major challenge.”

The more insecure, the more inflexible?

If Beijing is sticking to its economic policy in the teeth of international demands for a change so as to preserve jobs and thus domestic stability, adds Shen, the harsh punishment meted out to the dissident Mr. Liu is a matter of “political security and thus domestic stability.”

As the income gaps between rich and poor and between cities and villages widen, Shen suggests, “the government is sensitive to voices that would stimulate public resentment” against the authorities. “They consider such voices threatening.”

“At its core, the Chinese regime feels insecure,” argues Dr. Gordon. “That insecurity is at the root of why they act as they do. If they felt more confident they would be more flexible.”

At the same time, adds Shen, while “we need to reflect how China could better appreciate other countries’ criticism,” the bottom line for Beijing remains unchanged. “Domestic stability is more important than the need to handle the international side.”

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